Some useful tips to start a logistics company

Some useful tips to start a logistics company

You have already heard that starting a company is a big step. Also, you have already heard that starting a logistics company is even more complicated because it has many variables that have to be covered and maintained with time, the company has to be reliable and it involves a lot of investment at the beginning.

Maybe, the logistics and transport business is an easy one to enter, but the trick is to stay above water, to be there when people need you.  Try to picture your city or town and look at all the people that start a transport business (school bus, deliveries etc.) and you will see that anybody with a minivan can say they have a transportation business. This is what causes the big competition at the bottom end of the market and what makes it easy for people to start their business with little money or no money at all. This, in turn, is what also makes many companies go out of market early and go to bankruptcy.

The idea is to have some pointers to start your transport business and David Kiger is here to give you some of his ideas on how to start a logistics and transportation company and not die trying.

The first thing you need to start your business, apart from capital, is credibility.  Companies need to transport goods and that will never stop, but they need to know that their merchandise is going to arrive at the time the company said it would arrive.  Companies need to know that logistics start-ups apart from being a bit cheaper are not going to let them down in the long run.  Take for example the small business that started with only one van. If their first delivery arrives late, the company that hired them will not trust them anymore, even though there are excuses or good reasons like traffic or freight delivery schedules, nobody wants their cargo to arrive late or with problems.

The second tip for logistics and transportation start-ups is to take really good care of how they are going to be funded. People see it easy to start a transportation or logistics company because they think that the only thing they need is a vehicle and that money will come in as they go. WRONG. Contracts don’t appear by magic and companies have to be contacted and calls have to be made in order to assure contracts and deliveries. Some tips for funding include knocking doors at commercial Banks. Commercial banks nowadays are very interested in funding start-ups but they do ask for many things that are very important: that you have some expertise or experience and that you have a very well designed plan. Also, if you want to be on the top list of the bank you should have the necessary security in order to be able to pay the loan you are asking for.

Another source of funding is the institutions in each country that are created to help start-ups and new business grow to their full potential. In South Africa, for example, there is a fund called the Khula Start-up Fund.  This fund was created with the purpose of helping out start-ups that do not have good access to funding and to empower the people with the money they need to grow. Another example also in South Africa is the Industrial Development Corporation that helps companies with transportation assets and repayment is expected between 5 and 10 years.  

Another thing that start-ups involved in the logistics world have to look at are the costs involved in the business. To be clear, some of the most common costs in the logistics business are:  parking the vehicles, tracking devices and technology, maintenance, repairs for trucks and vehicles, fuel, toll fees, traffic fines that often occur, marketing programs and permits for road use in every country.

Image courtesy of Breakingpic at Flickr.com

One cost that is very important at the beginning is the cost of acquiring the trucks. Here there is a very important question that must be answered: Should trucks be leased or purchased? Here are the benefits of each one:

If you lease the trucks you will not need to have cash on hand to purchase the vehicles; the debt can be designed to fit your needs;  earnings and revenues will cover the cost of vehicles; the company does not own the trucks so it has less responsibilities towards the vehicle.

If you purchase the trucks before starting you can also have certain benefits such as negotiating the price and getting a better bargain at the beginning; an overdraft fund can be used to finance the purchase; trucks become assets and can be shown as if in the balance sheets.

Did you find these tips useful? Be sure to also read this post about port logistics

* Featured Image courtesy of KOMUnews at Flickr.com

 

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